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Literature Review
“The literature review is essential as a means of ‘thought organization’ and a record of evidence/ material gathered” (Brewerton, 2001, p 36). In this chapter, there will be put focus on existing literature on the subject of study. This will help put the case study in a context and answer the main questions stated in 1.3 Problem and purpose. Supply Chain Management will be described as well as the benefits, drawbacks and enabling factors for JIT and VMI. Furthermore, supplier and buyer selection, power and rating criteria will be investigated and explained.
Introduction to Supply Chain Management
Supply Chain Management is a well used expression and term today (Tan, 2001). That SCM is a popular concept is shown by the numerous academic articles, conferences and University courses covering the area (Burgess et al., 2006). The popularity can be expressed by drivers such as global sourcing and time and quality-based competition (Mentzer, DeWitt, Keebler, Soonhong, Nix, Smith, & Zacharia, 2001). Global sourcing has put more pressure on the supply chains of today and the need for coordination of flow of information and material has increased. Customers are constantly demanding faster on time deliveries without damages (Mentzer et al., 2001).
Several articles address the problem of the lack of a consensus between definition of Supply Chain Management (Tan, 2001; Burgess et al., 2001; Gibson et al., 2005; Skjoett-Larsen, 1999, Mentzer et al., 2001) . The reason for this is argued by Burgess et al. (2001), and Gibson et al. (2005), being that the field of SCM is fairly “young” and still in the early stages of evolution. Tan (2001), discuss that during the 1980´s in order for organizations to offer low costs together with high quality manufacturers started to utilize for example Just -In-Time (JIT) to improve the cycle time and this was the early stages of supply chain management. This idea is supported by Burgess (2005), who believe that the management philosophies linked to the development of SCM are JIT, Japanese management, total quality management and lean manufacturing. The term “supply chain management” seem to emerge from both the development of global competition that forced manufacturers to explore and form strategic relationships with their suppliers, but also from the logistic concept (or activities) that were developed to integrate supply chains (Tan, 2001). The term SCM first appeared in the beginning of the 1980´s in logistics journals (Skjoett-Larsen, 1999).
In 1990´s the concept further developed as outsourcing of non-core competencies began to have influence on company strategies and supply chains (Smock, 2003). Furthermore, manufacturers began to buy from certified suppliers and collaborate with these for product development in order to share costs and improve the efficiency in the suplly chain (Tan, 2001). Tan (2001), goes on by saying that retailers also developed the SCM concept by collaborating with transportation partners implementing deliveries straight to the end customer and cross-docking.
Important activities constituting Supply Chain Management are crucial for successful implementation. These are discussed by Mentzer et al, (2001) to be; integrated behaviour, mutually sharing information, mutually sharing risks and rewards, cooperation, the same goal and the same focus on serving customers and partners to build and maintain long-term relationships with. These factors will be further investigated in the case study in order to gather understand and compare the Focal company and their suppliers view on the different activities.
As firms shift from arm’s-length to closer buyer-supplier relationships, they are discovering the unique challenges associated with jointly coordinating value-adding activities in the supply chain. Closer strategic partnerships between firms often involve investments in assets that are customized. This increases the level of dependency between the parties and exposes them to greater risk of exploitation; create the need to protect investments. (Zaheer, McEvily & Perrone, 1998)
When companies have put focus on improving or “re-engineer” their supply chain relationship, spotlight has be put on the supplier relationships (Goffin et al., 1997). Supply chain relationships take all the members of the chain into account, while supplier relationship focuses on the relationship between buyer and supplier. Questions such as: “what is important” and “what are we measuring” have lead to new ways of thinking and new goals. These new goal have forced new ways of collaborating in supply chains. JIT and VMI are two of the philosophies that have been used to update supply chain relationships and management.
Just-In-Time
JIT is viewed both as a philosophy from which SCM derived and as an operational activity within SCM (Kannan & Tan, 2005; Tan, 2001). When JIT and SCM are viewed operational activities, Kannan & Tan (2005) say, that both JIT and SCM seek improvements in quality, the former by way of improvements in production processes, the latter by integrating development and production processes throughout the supply chain.
There are several definitions of Just -In-Time, it can be defined as a systematic approach that minimizes inventory by having supplies arrive at production and distribution points only when needed. This definition was initially developed by Toyota (Lee & Wellan, 1993). Definitions seem to vary with the background and interest of researchers and the time when the definition was written. Today, JIT is an activity-based philosophy that seen from operational management approach, is part of supply chain management, but population of readers. It measures the extent to which the test is an indication of what it intent to be (Mackey, 2005).
The criteria which define a valid case-study are: significance, completeness, consideration of alternative perspectives, sensitivity and respect (Brewerton, 2001). All these criteria have been taken into consideration while writing this thesis. This case study is significant because of its relevance in today’s business environment. There is a sense of understanding the whole case and therefore this thesis has completeness. By drawing on the work of other researchers there is a consideration of alternative perspectives. Since the authors have not revealed any names or answers that can be directly traced to a single person or company they have shown sensitivity and respect for participants.
One can question the validity of the findings from the suppliers’ questionnaires as there were only six out of eleven suppliers who answered in full.
Reliability
Brace (2004), say that it is hard to get complete accuracy in the answers from respondents concerning their behaviour and their attitudes. This can be due to the questions and the questionnaire itself or the respondents trying to influence the outcome or the respondents being under time pressure for example (Ghauri & Grønhaug, 2005).
The authors have tried to minimize the risk of non-accuracy as much as possible by promising the suppliers complete confidentiality, their name would not be mentioned in the thesis and no information about who has said what would be passed on to any stakeholder, only the authors have access to this information.
INTRODUCTION
1.1 BACKGROUND
1.2 COMPANY BACKGROUND
1.3 PROBLEM AND PURPOSE
1.4 DELIMITATIONS
1.5 DISPOSITION
1.6 STAKEHOLDER
2 RESEARCH METHODOLOGY
2.1 CASE STUDY
2.2 EXPLANATORY VS. EXPLORATORY
2.3 DATA COLLECTION
2.5 METHOD CRITICISM
3 LITERATURE REVIEW
3.1 INTRODUCTION TO SUPPLY CHAIN MANAGEMENT
4 EMPIRICAL RESULTS AND ANALYSIS
4.1 FINDINGS FROM LITERATURE REVIEW
4.2 FINDINGS FROM CASE STUDY
4.3 DISCUSSION
5 CONCLUSIONS
5.1 FURTHER RESEARCH
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From process selection to supplier selection.
